2018 (2) TMI 768 - HC - Income Tax

Validity of reopening of assessment - notice issued by AO u/s 148 beyond the 04 years - necessary approval of Chief Commissioner or CIT as per the provisions of Section 151(1) had not been obtained by the Assessing Officer -scope of amendment - Held that - As quite obvious from a reading of the Board s circular, issued on 31.10.1989 hat the Revenue authorities at a higher level existed and interpreted the amendments in the manner that the Calcutta High Court in East India Hotels Ltd. v. Deputy Commissioner of Income Tax (1992 (2) TMI 12 - CALCUTTA High Court) did. The arguments of the Revenue by laying emphasis on the expression as aforesaid appeared to have some force. However, a closer reflection would reveal that as aforesaid is capable of two interpretations narrow textual one as is urged on behalf of the Revenue and a broader one. In the contention of Section 151(1), the proviso when it refers to an Assessing Officer, could also mean not merely an Assessing Officer below the rank of Assistant Commissioner and Deputy Commissioner but also all Assessing Officers. The latter interpretation has been clearly followed by the Calcutta High Court as well as the Revenue authorities. Yet one more reason which persuades us to reject the Revenue s submission to disagree with the Calcutta High Court s judgment which is that in the case of a non-assessment (i.e. when the assessment is framed under Section 143(1), a higher standard of approval of the Joint Commissioner is insisted upon. The interpretation given by the Calcutta High Court where endorsed in this judgment, places even scrutiny assessment at par with such assessments and ensures that there is no disconnect and a minimum safeguard, by way of an opinion by the higher official expressing satisfaction is on the record before a notice is issued under Section 148, in respect of a period beyond 4 years from the end of the relevant assessment. - Decided in favour of assessee

Summary

Issues:
Interpretation of Section 151(1) of the Income Tax Act regarding the necessity of approval from Chief Commissioner or Commissioner for re-opening assessments beyond a certain period.

Analysis:
The primary issue in this case revolves around the interpretation of Section 151(1) of the Income Tax Act, specifically concerning the requirement of obtaining approval from the Chief Commissioner or Commissioner for re-opening assessments beyond a specified period. The appellant contended that the notice issued under Section 148 of the Act was without jurisdiction as the Assessing Officer proceeded to re-open the assessment without the necessary sanction. The ITAT supported the appellant's argument, citing judgments from the Calcutta High Court and the Allahabad High Court. The ITAT allowed the appeal based on these precedents, emphasizing the significance of obtaining approval from higher authorities before re-opening assessments.

The crux of the case lies in the amendments made to Section 151 of the Act, particularly after the Direct Tax Laws (Amendment) Act, 1987, and subsequent Finance Acts. The Revenue argued that post-amendments, Assessing Officers of certain ranks could issue notices without requiring approval from higher officials within a specified timeframe. The Revenue's counsel highlighted the changes brought about by the amendments and the evolution of the approval process for re-opening assessments. The appellant's counsel, on the other hand, supported the view of the Calcutta High Court, asserting that the requirement of approval from higher authorities was essential for completed scrutiny assessments beyond a certain period.

The Court delved into the legislative intent behind the amendments and the implications of the changes in Section 151(1). The Court analyzed the circular issued by the Board, which clarified the provisions related to re-opening assessments based on the type of case and the duration since the assessment year. The Court examined the interpretations put forth by the Revenue and the Calcutta High Court, emphasizing the importance of a broader interpretation to ensure consistency and adherence to procedural safeguards.

Ultimately, the Court sided with the assessee, concluding that the question of law framed in the appeal favored the appellant. The Court dismissed the appeal, upholding the requirement of obtaining approval from higher authorities before re-opening assessments beyond the specified period. This judgment reaffirmed the significance of procedural compliance and adherence to statutory provisions in the context of re-assessment proceedings under the Income Tax Act.